The Egyptian government ends its agreement with the IMF to kill the pound and decide to float it at the next Central Bank meeting

https://www.youtube.com/watch?v=rLGYM-wXPqA?si=IAwtbfDkFPe8JjYp
Updates on Egyptian economic affairs presented in this episode of Samri Channel.
The Monetary Policy Committee of the Central Bank of Egypt decided at its meeting - the first meeting in 2024 - to raise the overnight deposit and lending rates and the Central Bank’s main operation rate to the level of 21.25%, 22.25% and 21.75%, respectively. According to the Egyptian Central Bank statement seen by Al Arabiya.net, the credit and discount return rate was raised to the level of 21.75%.

In the September, November and December 2023 meetings, the Monetary Policy Committee of the Central Bank of Egypt decided to maintain the overnight deposit and lending rates and the central bank’s main operation rate at 19.25%, 20.25% and 19.75%, respectively. The credit and discount rates were also maintained at 19.75%. The Egyptian Central Bank statement, today, Thursday, indicated that the committee will continue to evaluate risk balances with the aim of achieving price stability in the medium term, and will not hesitate to use all its available tools to restrict monetary conditions. The committee stressed that the path of basic return rates depends on expected inflation rates.

The statement stated that the Monetary Policy Committee sees the escalation of risks surrounding inflation expectations, and therefore decided to raise the central bank’s basic return rates by 200 basis points, with the aim of reducing inflation expectations and restricting monetary conditions to maintain a downward path for inflation rates. The central bank said, “Globally, economic activity has been characterized by a slowdown as a result of the monetary tightening policies pursued by major central banks on demand.

Global inflationary pressures have also decreased recently as a result of restrictive monetary policies followed in many advanced and emerging economies, and accordingly, expectations of inflation rates for those economies have declined compared to what was presented at the previous meeting. However, there is a state of uncertainty around inflation expectations, especially with regard to global commodity prices, as a result of the geopolitical tensions that the world is currently witnessing, as well as the disruption of supply chains in the Red Sea.”

In a similar context, the International Monetary Fund mission extended its visits to Egypt until the end of the week to hold urgent talks on a possible deal in which new partners may join and obtain financing worth $10 billion. Meanwhile, Egyptian dollar bonds rose. This comes at a time when Egypt is discussing increasing its program from the International Monetary Fund, which is worth $3 billion - and only a little of it has been disbursed - as part of a broader package that may also include the World Bank, according to what was reported by “Bloomberg”, and seen by “Al-Arabiya”. "Business". Egypt is already the second largest borrower from the International Monetary Fund after defaulting Argentina. It is not clear whether the International Monetary Fund is requesting an immediate floatation of the Egyptian pound to sign the deal.

The oil-rich Gulf states that joined Egypt's previous bailouts are not expected to be part of any new agreement, according to the sources. Egyptian bonds due in February 2026 rose on Thursday 0.9 cents to 82 cents on the dollar, the highest level on a closing basis in almost a year. Other bonds maturing in 2025, 2027, 2028 and 2048 also jumped. Egyptian dollar bonds still offer yields of around 14%, which is high compared to most other sovereign bonds and means that the government is effectively locked out of the international bond market.

A breakthrough would go a long way toward lifting Egypt out of its worst economic crisis in decades, as the war between Israel and neighboring Hamas increases the urgency of achieving economic stability in the Middle East's most populous country. The negotiated deal will broadly cover what Moody's Investors Service estimates is Egypt's external financing gap in fiscal years 2024 and 2025.
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